Terrifying Corn Supply/Demand Situation Unfolding

This photo from a McHenry County, Ill., farmer was submitted to AgWeb’s Crop Comments. “Very sad,” he says.

The 2012 drought is causing severe repercussions throughout the crop, livestock and energy industries.

The 2012 corn crop continues to shrink. Farmer and market expert Jerry Gulke says his own crop is nearly deteriorating in front of his eyes.

"I went out in my fields this week," says the president of the Gulke Group. "It was one of my fields that if you drove by it, you’d ask: what drought?"

He chose a random row and picked 10 cobs. The results weren’t pretty. Half of the cobs were only half-filled with kernels.

"If I get 70 bushels to the acre, I’ll be happy. There were enough stalks there for 200 bushels or more, until June’s weather hit."

The depressing yield situation Gulke is seeing in his fields, is common across the country. So common, that Informa Economics drastically chopped their corn yield estimate on Friday. Its corn yield projection is now 120.7 bu./acre. However, the firm's is expecting a final national average yield of 131 bu./acre.

"The market tried to trade Informa’s corn yield estimate on Friday. We were up about 21 cents in corn and closed above $8."

USDA Updates Yield Estimates

On Friday, Aug. 10, USDA will release its first survey-based estimates for corn and soybeans. Currently USDA’s national corn yield average is currently 146 bu./acre. If they drop it down to the mid-120s like Informa, Gulke says we have a demand nightmare on our hands.

He says reducing feed needs, ethanol use and exports down to make Informa’s 120 estimate pencil out looks like an almost impossible job.

Gulke says on a recent CNBC segment, it was reported it takes 3 lbs. of corn to put a 1 lb. of gain on a hog, 5 lbs. of corn to put 1 lb. on a cow and about five times as much to make a gallon of ethanol. "There’s going to be a real push out there to do something about ethanol."

The general public, Gulke believes, is not going to want to see meat and food prices increase, at the expense of ethanol.

"If we allow ethanol to kill the livestock market, then we’ll have to buy our demand back. It has some repercussions for quite awhile. I don’t know how we solve this in the short-run, but I think we need to keep the pipeline flowing for the animals."

Not the Year to Store Grain

Gulke says he expects most farmers to sell their grain immediately this year, as opposed to storing.

"I’m going to harvest corn about three weeks earlier this year. If corn is still $8 out of the field, they’ll probably get all of mine. If beans are still $16, I don’t think I want to take the chance on storing."

The Next Round of Market Information

Gulke says Friday is bound to be interesting and the entire globe will be watching for USDA’s estimates. AgWeb.com will have full coverage of the reports and a special early analysis piece with Gulke.

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Anonymous8/4/2012 02:58 AM

Graves Co KY
A month ago my neighbors said I had the best looking corn in our area. We have ears aroung the edges but nothing out in the felds. The temperature out in the field gets higher and the corn don't germinate. Our beans are not much better. The leaves are turning yellow from like of moisture.They have a few small pods.

Anonymous8/4/2012 05:17 AM

The ethanol plants are already beginning to shut down. I am tired of farmers saying that we need the government to do something. The ethanol subsidy is also gone, which is funny since I never heard farmers complain about the corn subsidy that kept corn cheap for decades. If there is less meat then the consumer will have to pay more. Cheap meat is not a right. Maybe they will learn that food does not come from the store after all.

Anonymous8/4/2012 05:17 AM

The ethanol plants are already beginning to shut down. I am tired of farmers saying that we need the government to do something. The ethanol subsidy is also gone, which is funny since I never heard farmers complain about the corn subsidy that kept corn cheap for decades. If there is less meat then the consumer will have to pay more. Cheap meat is not a right. Maybe they will learn that food does not come from the store after all.